Planning scenarios for the future of auto insurance

We are still years, if not decades, away from the truly “driverless” car. There are still uncounted legal, technological, economic, insurance, and public policy issues to be addressed before self-driving cars take to the road in large numbers.

What is clear, however, is that cars are becoming safer each year as manufacturers add and refine features — ranging from cameras that eliminate blind spots to sensors that warn drivers about the proximity of other cars – that reduce both the likelihood of an accident and the severity of damage caused by accidents.

To date, improved automotive safety has not had much impact on auto insurance premiums, which average a little more than $1,000 in the US, according to the American Automobile Association.

Over time, however, we can anticipate a scenario in which reduced losses from automobile accidents enable insurers to lower premiums. Theoretically, at least, insurers should be able to maintain their margins in this scenario, as lower premium income would be offset by lower claims payouts.

That is the theory; whether such a scenario would play out in reality is another matter altogether. Under any circumstances, however, carriers which have encouraged customers to drive safely and to own cars with enhanced safety features – while making their own operating efficiency improvements – will be well-positioned against their competitors.

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